What Do Investors Look For In A Startup?

Daniel Nathanson, Ph.D. from the UCLA Anderson Graduate School of Business, explains what business investors look for in a new business.

Investors look for three things: management, management, and management. But what is it they look for? I say they look for the three C's. The three C's stand for credibility, contribution, and commitment. Credibility includes your track record, market knowledge, the fact that you have a realistic plan including the key risks and milestones, and that you have a team skills and have recruited a strong, solid internal team and external resources that are needed. In terms of commitment, investors want to know: why you're doing this? What did you give up to do this? What will you give up to make the succeed: time, savings, drop in income, family sacrifices? You need to be a hundred percent committed to your business.

The ones that succeed are the ones that persist. And they persist and they persist. And that's what investors look for. Who's going to walk through walls? Who's going to jump over hurdles when things get tough? And if you're going to fold your tent as soon as things get tough, you're going to be out of business. So you have to understand the level of commitment that is required when starting a business. Finally, they look for contribution meaning: what have you done so far to make this venture work? What sweat equity have you invested in? Have you done market research, created a prototype, written a plan, lined up suppliers and buyers, recruited a team, attained patents, gotten exclusivity rights, partnership agreements?

So its credibility, commitment, and contribution that is important. These are important characteristics of an entrepreneur and his or her team.